On January 14, 2020, FERC accepted revisions to ISO New England, Inc.’s (“ISO-NE”) Transmission, Markets and Services Tariff (“Tariff”), which update ISO-NE’s Financial Assurance Policy, which aims to ensure that resources achieve commercial operation by the time their relevant Capacity Commitment Period begins.  The revisions alter the methodology used to calculate the financial assurances requirements for resources that have cleared the Forward Capacity Auction (“FCA”) but have not yet achieved commercial operation (“Non-Commercial Resources”), basing it on the Net Cost of New Entry (“Net CONE”) value associated with the FCA, rather than the starting and clearing prices of the FCA.
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On December 20, 2019, the U.S. Court of Appeals for the D.C. Circuit (“D.C. Circuit”) denied petitions for review of a series of FERC orders that exempted certain North Carolina transmission customers of Virginia Electric and Power Company (“Dominion”) from the incremental costs to underground certain transmission lines in the Virginia portion of the Dominion’s service territory.  The challenges were brought by certain Virginia transmission customers of Dominion Energy, which sought to overturn FERC’s determination that only Dominion’s Virginia wholesale customers, not its North Carolina customers, should bear the costs of undergrounding three transmission line upgrade projects.
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On December 30, 2019, FERC accepted, subject to further compliance, revisions to PJM Interconnection, L.L.C.’s (“PJM”) Price Responsive Demand (“PRD”) program to align the program’s rules and requirements with those applicable to supply-side “Capacity Performance Resources” participating in PJM’s capacity market. PJM previously submitted PRD revisions in February 2019, but FERC rejected PJM’s filing in a June 2019 order, on the basis that PJM’s proposed method for calculating the Nominal PRD Value—i.e., the MW amount to be curtailed—was inconsistent with the manner in which PJM calculated a Load Serving Entity’s (“LSE”) capacity supply obligation (see July 18, 2019 edition of the WER). FERC’s December 30 order accepted PJM’s proposal to maintain the existing Nominal PRD Value calculation based on a LSE’s capacity obligation, which is itself derived from the LSE’s annual coincident peak demand. In response to a protest from PJM’s Independent Market Monitor (“IMM”), FERC also required PJM to clarify on compliance that an LSE is not eligible to receive certain bonus payments for load reductions during system emergencies when the prevailing LMP has not reached the applicable trigger price.
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On December 19, 2019, FERC issued a long-awaited order in which it directed PJM Interconnection, L.L.C. (“PJM”) to apply its Minimum Offer Price Rule (“MOPR”) to all state-subsidized capacity resources (“December 2019 Order”). FERC also adopted limited grandfathering and exemptions for certain resources.  The December 19 Order will have a significant impact on PJM’s capacity market. PJM requires resources subject to the MOPR to offer into the PJM capacity auctions at or above a PJM-determined offer floor. When this floor is above capacity auction clearing prices, the resource does not clear the market or receive any capacity market revenue. Capacity prices are also higher than they would be had the resource cleared the market.
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On December 12, 2019, the United States Court of Appeals for the Sixth Circuit (“Sixth Circuit”) issued an opinion affirming in part and reversing in part a bankruptcy court’s assertion of exclusive and unlimited jurisdiction over certain of FirstEnergy Solutions’ (“FES”) power purchase agreements that FERC had previously approved under the Federal Power Act (“FPA”) and that FES sought to reject in bankruptcy. While the Sixth Circuit agreed that the bankruptcy court has jurisdiction to decide whether FES may reject the contracts, it rejected the bankruptcy court’s decision to enjoin FERC from taking any action relating to the contracts, and permitting FES to reject the contracts. Characterizing the bankruptcy court’s decision as “a rash and unnecessary overreach,” the Sixth Circuit held that the injunction issued against FERC was overly broad, and the bankruptcy court’s standard for deciding whether to permit FES to reject the contracts too limited. The Sixth Circuit also rejected the bankruptcy court’s sole application of the business judgment rule to decide whether to permit FES to reject the contracts at issue. Rather, the Sixth Circuit held that the court should have also taken public interest considerations into account, and should have invited FERC to participate and provide an opinion in accordance with the FPA. Judge Richard Allen Griffin penned separate opinion dissenting in part, in which he concluded that the bankruptcy court exceeded its jurisdiction and infringed on FERC’s exclusive jurisdiction to decide whether to modify or abrogate a filed rate.
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On December 5, 2019, the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) granted a petition for rehearing en banc of an opinion it issued on August 2, 2019 (“August 2019 Opinion”) upholding FERC’s decision to conditionally approve the application of Transcontinental Gas Pipeline Company (“Transco”) to construct and operate the Atlantic Sunrise Project.  Petitioners challenge FERC’s use of tolling orders, which allow FERC to delay rehearing after granting a pipeline certificate, as impermissible under the Natural Gas Act and the Due Process Clause of the Fifth Amendment.  Specifically, Petitioners argue that FERC’s use of tolling orders in pipeline certificate proceedings unlawfully require challengers to wait for the rehearing order to issue before obtaining judicial review, while the pipeline can proceed with eminent domain proceedings and pipeline construction following the issuance of FERC’s certificate order.     
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On November 18, 2019, Anbaric Development Partners, LLC (“Anbaric”) filed a complaint against PJM Interconnection, L.L.C. (“PJM”) alleging that PJM’s transmission interconnection procedures deny meaningful open access interconnection service to merchant transmission projects designed to connect remote generation resources, including offshore wind generation, to the PJM transmission system (“Transmission Platform Projects”). Anbaric requested that FERC: find that the PJM Tariff is unjust, unreasonable and unduly discriminatory or preferential because it does not provide Transmission Platform Projects the opportunity to obtain material interconnection rights; direct that Transmission Platform Projects be given the opportunity to obtain material interconnection rights; and order PJM to modify its Tariff to include a new category of Transmission Platform Projects to connect remote renewable generation facilities to the PJM Transmission System. Anbaric also requested that any order from FERC apply to all of Anbaric’s projects with positions in PJM’s interconnection queue as of the date of its complaint.
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On November 22, 2019, FERC issued three separate orders accepting, subject to further compliance, California Independent System Operator Corporation’s (“CAISO”), the Midcontinent Independent System Operator, Inc.’s (“MISO”), and ISO New England, Inc.’s (“ISO-NE”) proposals to comply with FERC Order Nos. 841 and 841-A—addressing energy storage resources’ (“ESR”) participation in Regional Transmission Organization/Independent System Operator (“RTO/ISO”)-operated markets (see February 20, 2018 edition of the WER; April 10, 2019 edition of the WER; and May 22, 2019 edition of the WER for more background and context on Order No. 841). The November 22 orders, which follow FERC’s previous acceptance of PJM Interconnection, L.L.C.’s and Southwest Power Pool, Inc.’s storage participation proposals (see October 24, 2019 edition of the WER), found that the RTOs/ISOs generally complied with the requirements of Order No. 841. FERC ordered certain modifications to each RTO’s/ISO’s proposals, addressing metering and accounting practices, ESR bidding parameters, minimum size requirements, and transmission service charges, in addition to other issues. Commissioner McNamee issued separate opinions concurring with all three orders.
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On November 21, 2019, FERC announced that public utilities with transmission formula rates must revise those rates to account for changes in accumulated deferred income taxes (“ADIT”) resulting from the Tax Cuts and Jobs Act of 2017 (“TCJA”). Utilities with transmission formula rates under an Open Access Transmission Tariff, a transmission owner tariff, or a rate schedule must:

  • include a mechanism to deduct any excess ADIT from, or add any deficient ADIT to, their rate base in order to ensure rate base neutrality (the “Rate Base Adjustment Mechanism”);
  • return to, or recover from, customers any excess or deficient ADIT through an adjustment to the formula rate’s income tax allowance (“Income Tax Allowance Adjustment Mechanism”); and
  • incorporate a new permanent worksheet into the formula rate to annually track ADIT amounts.

FERC declined to adopt any compliance requirements for transmission stated rates, finding that the utility’s next rate case would be the most appropriate place to address excess or deficient ADIT resulting from the TCJA. Compliance filings are due the later of: (1) 30 days from the effective date of the final rule; or (2) the utility’s next informational filing following the final rule. 
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On September 19, 2019, one Independent and four Democratic Senators wrote a letter to FERC which expressed concerns over recent actions taken by FERC and which directed a series of questions to FERC regarding the “apparent erosion” of FERC’s role in preventing fraud and manipulation in U.S. energy and financial markets (see October 3, 2019 edition of the WER). The concerns expressed by the senators related to (i) the decline in the number of civil penalty actions initiated by FERC; (ii) the closing of FERC’s Division of Energy Market Oversight (“DEMO”), and (iii) FERC’s ending its policy on issuing Notices of Alleged Violations (“NAVs”) regarding investigations.
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